Happy 2016! Now, Back to the Future


Back to reality. That’s what the first week of January feels like. And, didn’t the equity markets give us a healthy taste of reality on Monday!

Back to work (although most of us probably never really stopped working) and Back to the Future, but not in a DeLorean.

I’m not talking about the film, although it is hard to believe that it is now 30 years old. DeLorean himself has since passed away, and we obviously don’t see too many DMC-12 time-machines on the road.

No, I’m thinking, “back to looking toward the future,” which is essentially the business of the retirement industry. Our goal is always to come up with innovative new ways to help people have a better future.

In that sense, HealthView is no different. We draw upon the information we have available to us today to help people predict and plan for future costs in retirement.

There’s a lot of science (actuarial and mathematics) involved in working to predict the future. But that’s only part of the equation (some pun intended). It is crucial to understand long-term trends (such as health care inflation rising at two to three times basic inflation), the impact of us living longer, and recent Social Security policy decisions that may reduce retirement income, as all of these directly impact retirement planning.

Fortunately, or unfortunately, we have a good idea of what to expect in the coming year as it relates to Social Security benefits and health care costs. And that’s without even needing a DMC-12 time-machine.

For example, the recent Social Security legislation has already begun to limit options for many who are deciding when to claim Social Security benefits. This could result in a loss  of up to $60,000 in potential income. Although filing for Social Security benefits may seem like a simple decision, individual circumstances can increase retirement income by hundreds of thousands of dollars.

Further related to Social Security, we know that this year’s zero Cost of Living Adjustment (COLA) on Social Security benefits will make it more difficult for many recipients to make ends meet and will lead to increases in retirement health care premium costs for more affluent Americans.

And while the impact will not be felt until 2018 (when the Medicare Means Testing brackets change), Medicare’s two-year look back will use 2016 Modified Adjusted Gross Income (MAGI) as the basis for Medicare surcharges. As a result, it could be beneficial for retirees to take steps to manage retirement income this year to reduce health care costs in 2018. If you are unfamiliar with MAGI, discuss MAGI management with your financial advisor.

Below is a table that highlights these bracket changes. As you can see, reductions in applicable income could have a huge impact on a person’s surcharges.


Beginning in 2018

Individuals Couples % Change in Cost
<$85,000 <$170,000 0%
$85,001-$107,000 $170,001-$214,000 37%
$107,001-$133,500 $214,001-$267,000 93%
$133,501-$160,000 $267,001-$320,000 149%
$160,000+ $320,000+ 204%


For example, a 40-year-old male currently earning $75,000 (assuming a 3% annual increase) will see an increase of 204% in surcharges at 66.


Based on brackets starting in 2018

Current Earnings Projected Earnings at 66 Premium Costs (Parts B and D) Surcharges Total Cost Means Testing Threshold Total Increase
$75,000 $161,744 $542,996 $1,107,711 $1,650,707 $160,000+ 204%


Maybe DeLorean should have focused on optimizing his Social Security benefits while minimizing his MAGI instead of trying to sell 55 pounds of cocaine to FBI agents for $55 million in an effort to save his auto company.

We’ll have more to share on these issues in the coming weeks and months, and over the year, you can expect me to keep coming back to the future. We’ve seen it and we’ll need to plan for it.

Maybe I was talking about the film after all. All that’s missing is a DeLorean. Just think, back in the mid 1970’s, DeLorean’s seed investors, including the British government, Johnny Carson and Sammy Davis Jr., didn’t realize that a DeLorean would be considered overpriced at $25,000. That’s about the cost of a high end health insurance policy or a Toyota Camry.

Go figure.

Happy New Year.